Economy

RBI dividend to govt halves to Rs 30659 crore

RBI dividend to govt halves to Rs 30659 crore

The former RBI Governor Raghuram Rajan had stated that during his tenure of three years, the RBI paid nearly as much dividend to the government as in the entire previous decade.

The Reserve Bank of India on Thursday announced that it will transfer only Rs 30,659 crore to the government for the year ended in June.

The government had expected Rs 58,000 crore in dividend from the RBI in 2017-18.

The shortfall in dividend from the RBI will likely spur the government to increase revenue from other areas, analysts added, including potentially cutting spending or seeking to raise more from planned market divestments in state-run companies.

The decline will hit the government hard as it could make it very difficult for New Delhi to meet its fiscal deficit target of 3.2 percent of gross domestic product for the year ending in March.

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As per Malegam panel report, the Reserve Bank of India transfers the balance of its profits to the Central Government as per Section 47 of the RBI Act, 1934.

The Central Government, last year, in a bid to defunct illegal money, scrapped high currency notes, belonging to denomination of Rs 500 and Rs 1000, which paved the way for potential surplus transfer from the RBI due to demonetisation.

The government on November 8 a year ago demonetised old Rs 500 and Rs 1,000 currency notes as part of efforts to fight corruption and the black money menace. "Will the RBI reveal the breakdown of the Rs 50,000 crore loss/expenditure?"

While no official statement has been provided about the fall in dividends so far, analysts speculate that it is because of the additional costs incurred due to the printing of new currency notes, and also in managing the excess liquidity generated due to the sudden inflow of deposits into the banking system post demonetisation.

"First quarter direct tax collections if continued in the fiscal will provide some buffer for central government deficit", he said.


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